Correlation Between Clearwater Paper and Olema Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Clearwater Paper and Olema Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Clearwater Paper and Olema Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearwater Paper and Olema Pharmaceuticals, you can compare the effects of market volatilities on Clearwater Paper and Olema Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Clearwater Paper with a short position of Olema Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Paper and Olema Pharmaceuticals.

Diversification Opportunities for Clearwater Paper and Olema Pharmaceuticals

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Clearwater and Olema is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Paper and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and Clearwater Paper is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Clearwater Paper are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of Clearwater Paper i.e., Clearwater Paper and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between Clearwater Paper and Olema Pharmaceuticals

Considering the 90-day investment horizon Clearwater Paper is expected to generate 1.39 times less return on investment than Olema Pharmaceuticals. But when comparing it to its historical volatility, Clearwater Paper is 1.7 times less risky than Olema Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Olema Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  291.00  in Olema Pharmaceuticals on September 2, 2022 and sell it today you would lose (6.00)  from holding Olema Pharmaceuticals or give up 2.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Clearwater Paper  vs.  Olema Pharmaceuticals

 Performance (%) 
       Timeline  
Clearwater Paper 
Clearwater Performance
0 of 100
Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The new stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Clearwater Price Channel

Olema Pharmaceuticals 
Olema Performance
0 of 100
Over the last 90 days Olema Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Olema Price Channel

Clearwater Paper and Olema Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clearwater Paper and Olema Pharmaceuticals

The main advantage of trading using opposite Clearwater Paper and Olema Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearwater Paper position performs unexpectedly, Olema Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Olema Pharmaceuticals will offset losses from the drop in Olema Pharmaceuticals' long position.
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The idea behind Clearwater Paper and Olema Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Transaction History module to view history of all your transactions and understand their impact on performance.

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